CG AND CSR SYNERGIES AND INTERRELATIONSHIPS 443

Corporate Governance and Corporate Social

Responsibility Synergies and Interrelationships
Dima Jamali*, Asem M. Safieddine and Myriam Rabbath

ABSTRACT

Manuscript Type: Empirical

Research Questions/Issue: This paper seeks to explore the interrelationships between corporate governance (CG) and
corporate social responsibility (CSR): first, theoretically, by reviewing the literature and surveying various postulations on
offer; second, empirically, by investigating the conception and interpretation of this relationship in the context of a sample
of firms operating in Lebanon. Accordingly, the paper seeks to highlight the increasing cross-connects or interfaces between
CG and CSR, capitalizing on fresh insights from a developing country perspective.
Research Findings/Results: A qualitative interpretive research methodology was adopted, drawing on in-depth interviews
with the top managers of eight corporations operating in Lebanon, with the findings suggesting that the majority of
managers conceive of CG as a necessary pillar for sustainable CSR. These findings are significant and interesting, implying
that recent preoccupation with CG in developing countries is starting to be counterbalanced by some interest/attention to
CSR, with growing appreciation of their interdependencies and the need to move beyond CG conformance toward
voluntary CSR performance.
Theoretical Implications: This study makes two important contributions. First, it suggests that there is a salient two-way
relationship and increasing overlap between CG and CSR. While much previous literature has researched CG and CSR
independently, this paper makes the case for considering them jointly and systematically. Second, the paper outlines a
number of theoretical propositions that can serve as the basis for future research on the topic, particularly in developing
countries, given that the data and theoretical propositions are both derived from and tailored to developing country
contexts.
Practical Implications: This study can potentially alert managers to the increasing overlap between the CG and CSR
agendas and the need to exert diligent systematic efforts on both fronts. CG and CSR share more in common than previously
assumed, and this needs to be accounted for by practitioners. The research can also alert policy makers in developing
countries to the need to increase the vigilance and capacity of the regulatory and judicial systems in the context of CG
reform and to increase institutional pressures, particularly of the coercive and normative variety to enhance CSR adoption.

Keywords: Institutional Theory, Corporate Social Responsibility, Business Outcomes, National Outcomes

INTRODUCTION failures have redirected attention to issues of good gover-

nance, ethics, trust, and accountability, heightening the

C orporations have traditionally been conceived as self-

centered, profit-maximizing entities constituting the
central tenets of capitalism and free market philosophies
(Hg, 2007). Until recently, the connections between capital-
ism, economic growth, and self-interested corporation have
largely gone unquestioned in policy circles (Hg, 2007).
However, recent and monumental corporate scandals and
*Address for correspondence: University of Southampton – School of Management,
Highfield Southampton SO17 1BJ, UK. Tel: +44 (0) 23 8059 8961; Fax: +44 (0) 23 8059
3844; E-mail: D.Jamali@soton.ac.uk
debate on topics of corporate governance (CG) and the ethics
of economic conduct (Marsiglia and Falautano, 2005).
Accordingly, at no time in history have the role and power
of the corporation been accorded more popular attention
and concern, with the pure profit maximization axiom
increasingly called into question.
While shareholder value maximization is still a major goal
for corporations worldwide, the rise in social activism and
the emergence of new expectations have indeed caused other
aspects of corporate performance to be examined alongside
financial results. As firms grow in size and influence, they are

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doi:10.1111/j.1467-8683.2008.00702.x
444
no longer expected to be mere contributors to the global
economy, but rather to reconcile and skillfully balance mul-
tiple bottom lines and manage the interests of multiple stake-
holders (Jamali, 2006). There is some recent evidence to
suggest that organizations are generally more inclined today
to broaden the basis of their performance evaluation from
a short-term financial focus to include long-term social,
environmental, and economic impacts and value added
(Hardjono and van Marrewijk, 2001).
This is where the concepts of CG and corporate social
responsibility (CSR) enter the picture. Under the umbrella of
CG, companies are encouraged to promote ethics, fairness,
transparency, and accountability in all their dealings. They
are expected to continue generating profits while maintain-
ing the highest standards of governance internally. A firm’s
decisions should also be aligned with the interests of differ-
ent players within and outside the company (Freeman,
1984). Hence, businesses have to also keep their activities
attuned to society’s ethical, legal, and communal aspira-
tions. This falls in the realm of CSR, which has attracted
increasing attention in recent years in relation to how com-
panies approach their interactions with their various stake-
holders – from providing quality products and services, to
undertaking charitable activities.
Much of the previous literature has researched and dis-
cussed CG and CSR independently, as being unrelated
accountability models, whose guidelines, reporting stan-
dards, and oversight mechanisms have evolved separately
(Bhimani and Soonawalla, 2005). However, we feel that CG
and CSR are strongly and intricately connected, and that
previous literature has fallen short in capturing the nature
and essence of this relationship. As Bhimani and Soonawalla
(2005) put it, CG and CSR are two sides of the same coin.
This paper will explore this relationship in depth; first, theo-
retically, by reviewing the literature and highlighting how
this CG–CSR relationship has been posited. Through a quali-
tative study in the Lebanese context, this paper will also
investigate managerial interpretation and practical applica-
tion of CG and CSR, their understanding of the nature of this
relationship, as well as their efforts at pragmatic integration
of each of these two paradigms in their daily operations.
LITERATURE REVIEW
Corporate Governance Literature
This paper will focus on an important – and in no way
simplistic – definition of CG as “the system by which com-
panies are directed and controlled” (Cadbury, 2000: 8). The
control aspect of CG encompasses the notions of compliance,
accountability, and transparency (MacMillan, Money,
Downing and Hillenbrad, 2004), and how managers exert
their functions through compliance with the existing laws
and regulations and codes of conduct (Cadbury, 2000). The
importance of CG lies in its quest at crafting/continuously
refining the laws, regulations, and contracts that govern com-
panies’ operations, and ensuring that shareholder rights are
safeguarded, stakeholder and manager interests are recon-
ciled, and that a transparent environment is maintained
wherein each party is able to assume its responsibilities and
contribute to the corporation’s growth and value creation
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CORPORATE GOVERNANCE
(Page, 2005). Governance thus sets the tone for the organiza-
tion, defining how power is exerted and how decisions are
reached.
A narrow view of CG portrays it as an enforced system
of laws and of financial accounting, where socio-
environmental considerations are accorded a low priority
(Saravanamuthu, 2004). There is, however, a broader CG
conception, emphasizing every business’ responsibilities
toward the different stakeholders that provide it with the
necessary resources for its survival, competitiveness, and
success (MacMillan et al., 2004). As such, managers are pri-
marily accountable toward stockholders whose wealth and
fortunes are at stake. But they are also responsible toward
employees, suppliers, customers, and communities whose
investments in the company are equally significant in other
important respects. Thus, within this broader conception,
the interests of all stakeholders are accorded due regard and
consideration and posited as constraints on managerial
action and shareholder rights (Kendall, 1999; Page, 2005).
Other focal elements or ingredients of good governance
include corporate leadership and strategy setting. These
aspects involve defining roles and responsibilities, orienting
management toward a long-term vision of corporate perfor-
mance, setting proper resource allocation plans, contri-
buting know-how, expertise, and external information,
performing various watchdog functions, and leading the
firm’s stakeholders in the desired direction (MacMillan et al.,
2004; Cadbury, 2000; Page, 2005). The leadership and control
aspects of CG are thus not mutually exclusive; rather, they
go hand in hand, and they both define the extent of power
accorded to various stakeholders, including executives,
managers, employees, and, to a lesser extent, external con-
stituencies and actors (MacMillan et al., 2004). Leaders in
this respect should exercise their flair in taking their compa-
nies forward, while according due regard to their responsi-
bilities to shareholders and stakeholders (Mallin, 2005).
Corporate Governance is also intimately concerned with
honesty and transparency, which are increasingly expected of
the public both in corporate dealings and disclosure (Page,
2005). Investor confidence and market efficiency depend on
the disclosure of accurate information about corporate per-
formance. To be of value in global capital markets, disclosed
information should be clear, consistent, and comparable
(OECD, 1999). Moreover, transparency and disclosure of
information between managers and employees are essential
to earn employee trust and commitment. These factors ensure
an accurate and timely reporting of activities, thus providing
the necessary underpinning that would facilitate the applica-
tion of sound governance mechanisms (Cadbury, 2000).
While the above focuses primarily on internal governance
mechanisms and principles, a holistic view of CG needs to
also account of external governance mechanisms, including
the takeover market and the legal system (Denis and
McConnell, 2003). Admitting that the legal system is a uni-
versally important CG mechanism, providing for the protec-
tion of investor rights and enforcement of rules (La Porta,
Lopez de Silanes, Shleifer and Vishny, 1998), the market for
corporate control becomes salient when there is enough
incentive for outside parties to seek control of the firm or, in
other words, when internal control mechanisms fail to a
large degree (Denis and McConnell, 2003). Given the
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CG AND CSR SYNERGIES AND INTERRELATIONSHIPS 445

TABLE 1
Basic Principles of Corporate Governance

OECD principles Description

Protection of shareholders’ rights
Equitable treatment of shareholders
Protection of stakeholders’ rights
Accurate disclosure of information
Diligent exercise of board
responsibilities
Entails the protection of shareholders and maintaining investor confidence at
all times in way of ensuring the continuous inflow of needed capital.
Entails the equitable treatment of all equity investors, including minority
shareholders.
Entails the skillful consideration and balancing of the interests of all
stakeholders, including employees, customers, partners, and the local
community.
Entails the accurate and timely disclosure of clear, consistent, and
comparable information in good times and bad times.
Board elections should be totally free from political interference and board
members should exercise their responsibilities diligently and independently.

OECD, Organization for Economic Cooperation and Development (1999).

dynamic interrelationships among various CG mechanisms,
external aspects invariably deserve consideration to provide
a contextualized understanding of firm-specific internal CG
dimensions.
In summary, CG thus generally revolves around a set of
universal attributes, including ensuring accountability to
shareholders and other stakeholders (Keasy and Wright,
1997), creating mechanisms to control managerial behavior
(Tricker, 1994), ensuring that companies are run according to
the laws and answerable to all stakeholders (Dunlop, 1998),
ensuring that reporting systems are structured in such a way
that good governance is facilitated (Kendall, 1999), crafting
an effective leadership/strategic management process that
incorporates stakeholder value as well as shareholder value
(Tricker, 1994; Kendall, 1999), and enhancing accountability
and corporate performance (Keasy and Wright, 1997). Lead-
ership, direction, control, transparency, and accountability
attributes thus lie at the heart of sound and effective CG
(Huse, 2005; Van den Berghe and Louche, 2005).
A variation of these core attributes is articulated in turn in
the OECD Principles (1999), listed and described in Table 1.
These principles, originally adopted by the 30 member coun-
tries of the OECD in 1999, have become a reference tool for
countries all over the world (Jesover and Kirkpatrick, 2005),
providing an international benchmark for CG, and specific
guidance for policy makers, regulators, and market partici-
pants in improving the legal, institutional, and regulatory
framework that underpins CG. These principles have exhib-
ited a good level of adaptability in varying legal, economic,
and cultural contexts, and they have served as the basis for
various reform initiatives by governments and the private
sector in different countries (Jesover and Kirkpatrick, 2005).
Corporate Social Responsibility Literature
CSR on the other hand is a concept that has attracted world-
wide attention and acquired a new resonance in the global
economy (Jamali, 2006). Heightened interest in CSR in
recent years has stemmed from the advent of globalization
and international trade, which have reflected in increased
business complexity and new demands for enhanced trans-
parency and corporate citizenship. Moreover, while govern-
ments have traditionally assumed sole responsibility for the
improvement of the living conditions of the population,
society’s needs have exceeded the capabilities of govern-
ments to fulfill them (Jamali, 2006). In this context, the spot-
light is turning to focus on the role of business in society, and
companies are seeking to differentiate themselves through
engagement in what is referred to as CSR. The World Busi-
ness Council for Sustainable Development (WBCSD) defines
CSR as the commitment of business to contribute to sustain-
able economic development, working with employees, their
families and the local communities (WBCSD, 2001). More
generally, CSR is a set of policies, practices, and programs
that are integrated throughout business operations and
decision-making processes, and intended to ensure the
company maximizes the positive impacts of its operations
on society (Business for Social Responsibility, 2003).
The most common conceptualizations of CSR are those of
Carroll (1979) and Lantos (2001). Carroll (1979; 1991) differ-
entiated between four types of CSR, namely, economic (jobs,
wages, services), legal (legal compliance and playing by the
rules of the game), ethical (being moral and doing what is just,
right, and fair) and discretionary (optional philanthropic con-
tributions), while Lantos (2001) collapsed these categories
into three: ethical, altruistic, and strategic. According to
Lantos (2001), ethical CSR is morally mandatory and goes
beyond fulfilling a firm’s economic and legal obligations, to
its responsibility to avoid harm or social injuries, even
in cases where the business does not directly benefit. Altru-
istic CSR, according to Lantos (2001), is humanitarian/
philanthropic CSR, which involves genuine optional caring,
irrespective of whether the firm will reap financial benefits or
not. Examples include efforts to alleviate public problems
(e.g., poverty, illiteracy) in an attempt to enhance society’s
welfare and improve the quality of life. Strategic CSR on the
other hand is strategic philanthropy aimed at achieving stra-
tegic business goals while also promoting societal welfare

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TABLE 2
Preliminary Links between Corporate Governance (CG) and Corporate Social Responsibility (CSR)
Corporate governance
Broader CG conception: Entails due regard to all
stakeholders and ensuring that firms are answerable to
all their key stakeholders (Dunlop, 1998; Kendall,
1999)
Narrow CG conception: Ensuring accountability,
compliance, and transparency (Keasy and Wright,
1997; MacMillan et al., 2004)
(Jamali, 2007). The company strives to identify activities and
deeds that are believed to be good for business as well as for
society (Quester and Thompson, 2001).
Many scholars also conceive of CSR as encompassing two
dimensions: internal and external. On the internal level,
companies revise their in-house priorities and accord due
diligence to their responsibility to internal stakeholders,
addressing issues relating to skills and education, workplace
safety, working conditions, human rights, equity consider-
ations, equal opportunity, health and safety, and labor rights
(Jones, Comfort and Hillier, 2005). With respect to the
external dimension of CSR – which admittedly receives
more attention in the literature (Deakin and Hobbs, 2007) –
priority shifts to the need for corporations to assume their
duties as citizens, and accord due diligence to their external
– economic and social – stakeholders and the natural
environment (Munilla and Miles, 2005). The environmental
component addresses primarily the impacts of processes,
products, and service on the environment, biodiversity, and
human health, while the social bottom line incorporates
community issues, social justice, public problems, and
public controversies. Addressing these two CSR dimensions
often implies difficult adjustments and willingness to con-
sider multiple bottom lines (Elkington, 2006). It also often
requires good communication of CSR objectives and actions
(Hancock, 2005), new standards, control and performance
metrics (Lantos, 2001), and the successful integration of CSR
into the culture of the organization (Jamali, 2006).
Links between CG and CSR
In light of the overview presented above, there is a discern-
able overlap between CG and CSR. More specifically, when
considering the broader conception of CG, it is clear that
good governance entails responsibility and due regard to the
wishes of all key stakeholders (Kendall, 1999) and ensuring
companies are answerable to all stakeholders (Dunlop,
1998). There is thus a clear overlap between this conception
of CG and the stakeholder conception of CSR that considers
business as responsible vis-à-vis a complex web of interre-
lated stakeholders that sustain and add value to the firm
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CORPORATE GOVERNANCE
CSR
Stakeholder approach to CSR: Corporations are the crux
of a complex web of stakeholder relationships and
have an obligation or responsibility to these different
stakeholders (Freeman, 1984)
Internal dimension of CSR: Corporations should accord
due diligence to their responsibility to internal
stakeholders addressing issues relating to skills and
education, workplace safety, working conditions,
human rights, equity/equal opportunity, and labor
rights (Grosser and Moon, 2005; Jones et al., 2005)
(Freeman, 1984; Post, Preston and Sachs, 2002; Jamali, 2008).
Conversely, various CSR scholars emphasize the need to
uphold the highest standards of governance internally, par-
ticularly in discussions of the internal dimension of CSR
(Perrini, Pogutz and Tencati, 2006; Rosam and Peddle, 2004;
Grosser and Moon, 2005). These preliminary links are high-
lighted in Table 2.
Other links can also be detected. Both CG and CSR call on
companies to assume their fiduciary and moral responsibili-
ties toward stakeholders. This act of accountability is crucial
for a business to gain and retain the trust of its financial
investors and other stakeholders (Page, 2005). Both concepts
thus draw vigor from the same sources, namely transpar-
ency, accountability, and honesty (Van den Berghe and
Louche, 2005). Marsiglia and Falautano (2005) similarly
suggest that good CG and CSR initiatives are gradually
advancing from a philanthropic variant of corporate capital-
ism to authentic strategies intended to regain the trust of
clients and society at large. While CG implies “being held
accountable for,” CSR means “taking account of” and both
mechanisms are increasingly used by firms to regulate their
operations (Beltratti, 2005; Marsiglia and Falautano, 2005).
Windsor and Preston (1988) argue that, within the frame-
work of legitimacy theory, CG and CSR are intricately
related notions defining the interaction between an organi-
zation and its internal and external sociopolitical environ-
ment, with both increasingly considered as complementary
fundamental prerequisites for sustainable growth within
a globalizing business environment (Van den Berghe and
Louche, 2005).
Both disciplines are also perceived to confer important
long-lasting benefits and to ensure the endurance of the
business. With respect to CG, it is observed that good gov-
ernance mechanisms reconcile the interests of owners, man-
agers, and all those dependent on the corporation, allowing
corporations to secure long-term capital, retain the confi-
dence of financiers, and to use the obtained capital profi-
ciently. Gompers, Ishii and Metrick (2003), for example, find
evidence that CG is significantly correlated with both stock
returns and firm value. Ho (2005) reports evidence that good
CG generally enhances firm competitiveness and results in
© 2008 The Authors
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CG AND CSR SYNERGIES AND INTERRELATIONSHIPS
FIGURE 1
Four Key Pillars of Corporate Social Responsibility (CSR) (Adapted from Hancock, 2005)
Strategic Governance
• Strategic scanning
capability
• Agility/adaptation
• Performance
indicators/monitoring
• Traditional governance
concerns
• International “best
practice”
superior financial performance. CSR in turn increases the
trustworthiness of a firm and strengthens relationships with
core stakeholders (Aguilera, Rupp and Ganapathi, 2007),
which may lead to decreased transaction costs and increased
attractiveness in the eyes of investors (Hancock, 2005). While
the business case for CSR remains controversial (Margolis
and Walsh, 2003), a bulk of accumulating evidence suggests
that CSR can result in lower environmental costs, enhanced
innovation capability, improved recruitment/retention rates,
increased employee satisfaction, and positive perceptions of
the firm (Hancock, 2005; Aguilera et al., 2007; Barnett, 2007).
Admittedly, short-term costs may be incurred when design-
ing good CG and CSR initiatives, but there are also several
indicators pointing to positive win-win outcomes for busi-
nesses that are seriously committed to both (Marsiglia and
Falautano, 2005).
Three Relational Models Examined
While we have witnessed significant advances in research
relating to each of these respective paradigms, and few
recent formulations hinting to their cross-connections, some
lingering questions persist, pertaining to their interrelation-
ships, namely, are CG and CSR independent or interdepen-
dent functions? Are they mutually exclusive or mutually
coexistent and increasingly convergent? A potential conver-
gence is alluded to in a recent paper by Elkington (2006),
where there is a mention of a progressive overlap between
the CG agenda and the CSR and sustainable development
agendas. Elkington (2006: 522) claims that “it is timely to
review the increasingly complex cross-connects between the
rapidly mutating governance agenda and the burgeoning
world of CSR, social entrepreneurship and sustainable
development.” In heeding this call, we present here a review
of several models which have posited a relationship
between CG and CSR, namely: (1) CG as a pillar for CSR,
(2) CSR as an attribute of CG, and (3) CG and CSR as coexist-
ing components of the same continuum.
Model # 1: CG as a Pillar of CSR. This depiction of CG as a
pillar of CSR requires an effective CG system to be in place
as a foundation for solid and integrated CSR activities. This
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
447
Key Pillars of CSR
• Human Capital Stakeholder Environment
• Labor relations Capital • Brand equity
• Recruitment / • Regulators and • Cost/risk reduction
retention strategies policy makers • Market share growth
• Employee • Local • Process efficiencies
motivation communities / • Customer loyalty
• Innovation capacity NGOs • Innovation effect
• Knowledge • Customer
development relationships
• Alliance
partners
is clearly illustrated in the postulation of Hancock (2005)
who delineates four pillars for CSR, with strategic gover-
nance (entailing traditional CG concerns coupled with stra-
tegic management capability) highlighted as one of these
core pillars. Hence, as illustrated in Figure 1, Hancock (2005)
depicts CG as one of the main pillars of CSR along
with human capital, stakeholder capital, and the environment
(Figure 1).
Hancock (2005) argues that investor and senior manage-
ment attention should be focused on these four core pillars,
strategic governance, human capital, stakeholder capital, and
the environment, which together help account for about
80 per cent of a company’s true value and future value-
creating capacity. In other words, consistent with a resource-
based perspective (Barney, 2007; Wright, Dunford and Snell,
2007), the model argues that value creation, even in relation
to CSR, is contingent on leveraging human, stakeholder, and
environmental capital through (or coupled with) good stra-
tegic governance. CG is thus considered according to this
model as one of CSR’s basic building blocks. This conception
is consistent with Elkington’s (2006) who views CSR as the
responsibility of corporate boards, and good CG as a foun-
dational requirement or pillar for sustainable CSR.
Model # 2: CSR as a Dimension of CG. Another model
encountered in the literature is the one presented by Ho
(2005), who considers CSR as an attribute or dimension of
CG, thus widening the scope of CG, and incorporating non-
financial risks into the risk mitigation dimension of CG
activities. As illustrated in Figure 2, this conception of CG
includes conventional dimensions or attributes (e.g., board
structure, strategic leadership, stewardship, social responsi-
bilities, and capital structure and market relations), as well
as CSR. This is consistent with the writings of other authors
(e.g., Kendall, 1999; OECD, 1999), who also consider CSR as
an integral part of CG.
Ho (2005) proposes through this framework to gauge
CG more holistically by considering a range of relevant
attributes, including CSR. Her work builds in this respect on
the work of Kendall (1999) who considers that good CG also
entails ensuring that companies are run in a socially respon-
sible way and that there should be a clearly ethical basis to
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FIGURE 2
Corporate Social Responsibility Embedded in Corporate Governance (Adapted from Ho, 2005)

Board Structure
Separate supervisory and
executive roles
Nonexecutive directors
Election procedure
Nomination, audit and
compensation committees
Strategic Leadership
Set corporate objectives
Direct competitive focus
Make major decisions
Measure performance
Stewardship
Determine executive pay
Legislative safeguards
Governance policy and
governance committee
Director participation
Regular reviews
Corporate Governance Ask tough questions and
demand answers

Capital Structure & Market

Relations Social Responsibilities
Capital concentration Adopt policies
Satisfy shareholders & R&D Enforce and audit
Continuous dialogue with investors Report on conformance
& market

FIGURE 3
The Corporate Responsibilities Continuum (Bhimani and Soonawalla, 2005)
Corporate Corporate
Conformance Performance

Corporate Corporate Corporate Stakeholder

Financial Governance Social Value
Reporting Responsibility Creation

the business complying with the accepted norms of the
society in which it is operating. In other words, according to
this model, being responsible externally to the society at
large and internally to employees should be embedded in
CG formulations and structures. Ho’s study (2005) provides
evidence that higher commitments to CSR are strongly and
positively related to the qualifications and terms of directors,
boards that exercise strong stewardship and strategic lead-
ership roles, and the management of capital market pres-
sures, and that these various attributes combined constitute
the hallmarks of good CG.
Model # 3: CG and CSR as Part of a Continuum. Bhimani
and Soonawalla (2005) portray CG and CSR as complemen-
tary constituents of the same corporate accountability
continuum. They consider that poor CG and misleading
financial statements are one side of the corporate coin – the
other side being poor CSR (Bhimani and Soonawalla, 2005).
Their corporate responsibilities continuum (Figure 3) is
intended as an integrative framework, designed to reconcile
conformance and performance reporting issues that should
be articulated in a comprehensively integrated manner
rather than disparately (Bhimani and Soonawalla, 2005). The
continuum reflects varying degrees of compliance with laws
and legally enforceable standards, with stress placed on cor-
porate conformance on the left end of the continuum and
attention shifting to corporate performance on the right end,
where codes/standards are extremely difficult to apply, and
oversight mechanisms are much less evident.
Implied in this model is the idea that CG has been the
predominant focus of attention in research and practice, but
this is starting to be counterbalanced by some interest in
CSR and CSR reporting, which, while still not mandatory, is
portrayed as increasingly desired (Bhimani and Soonawalla,
2005). The model presented here is also a good reminder
of the nuances increasingly noted in the literature (e.g.,
Marsiglia and Falautano, 2005; Clarke, 2007) between legally
binding requirements increasingly embodied in governance
mechanisms requiring compliance and conformance, and
self-regulatory stakeholder and CSR initiatives, which are
evidence of voluntary corporate social performance. It is
evident that even today, CG and compliance with continu-
ously evolving legal requirements continue to draw more
attention than voluntary CSR performance. Nevertheless,
the continuum serves the purpose of delineating the basic
building blocks of corporate accountability, with CG and

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CG AND CSR SYNERGIES AND INTERRELATIONSHIPS
compliance on the left-hand side constituting the basic cor-
nerstone and the remaining items being gradually integrated
in an attempt to strengthen overall accountability on a global
basis.
We revisit those three models in the empirical section
through a qualitative study in the Lebanese context, explor-
ing managerial conceptions and practical application of CG
and CSR, and their understanding of the nature of their
interrelationships. The Lebanese context provides a fertile
ground for an exploration of CG and CSR dynamics and
their interrelationships, given that CG and CSR issues have
attracted increasing attention in the postwar environment
(Saidi, 2004). The Lebanese context could also provide inter-
esting insights into the interplay of political economy con-
straints and CG/CSR applications, with potential relevance
to other developing countries. We thus turn in the next
section to provide a brief relevant contextual background
about Lebanon followed by the presentation of the research
methodology and empirical findings of the paper.
BACKGROUND INFORMATION
ABOUT LEBANON
Lebanon is a small country located along the eastern shore
of the Mediterranean sea bounded on the north and east by
Syria and on the south by Israel, with a total area of 10,452
square kilometers and a population of around four million
inhabitants. Lebanon qualifies as a parliamentary republic
with a centralized, multireligious, and multiparty govern-
ment. Its quasi-democratic political system is based on
power sharing between the country’s confessional groups.
The grouping of people by religion plays a critical role
in Lebanon’s political and social life and has given rise to
Lebanon’s most persistent and bitter conflicts.
Since its independence from French rule in 1943, Lebanon
has been characterized by large public freedoms, which
have given it a distinctive position that made it a haven in
the region, a place where different ideas, currents, and
trends can thrive and interact. Peaceful multicultural coex-
istence, however, collapsed into violent warfare in the years
1975–1989. The conclusion of the Taef Accord of 1989 led to
the reinstatement of security. However, the war, which
Lebanon endured, interrupted the normal course of
development, leading to an overall deterioration in political,
economic, and social conditions.
Lebanon is now in the phase of reconstitution of its politi-
cal, economic, and social structures and institutions. The
first phase of reconstruction and development, namely the
rehabilitation of the physical infrastructure, has been com-
pleted and has reestablished normal operations of public
services. Daunting challenges, however, lie ahead particu-
larly in terms of economic recovery. Postwar governments
have pursued monetary stabilization policies aimed at
curbing inflation rates and restoring confidence in the
national currency. However, recent governments have had
to go further in their stabilization policy to finance the
growing budget deficit.
The main economic challenge confronted by successive
governments in recent years has indeed been large recurring
budget deficits, averaging more than 18 per cent of esti-
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
449
mated GDP over 1997–2006. Efforts to restore fiscal balance
have generally been undermined by the high costs and
expenditures allocated to sustaining the postwar reconstruc-
tion program. Fiscal issues have therefore tended to domi-
nate policy making in the postwar years, limiting the
government’s scope to adopt more growth-oriented mea-
sures, and accentuating the need for greater reliance on the
private sector to promote growth, generate employment, and
improve standards of living.
The Lebanese private sector has traditionally been the
dominant engine of growth in a relatively open and liberal
economic environment, and its resilience has been invoked
in the postwar context to lead the reemergence of Lebanon
as a preeminent regional hub for trade and services. Capi-
talizing on its traditional strength in the banking and ser-
vices segments, the private sector is rising to the challenge,
but the constraints imposed by fiscal macroeconomic reali-
ties are real, and the scope for private sector maneuver
seems limited at best. The private sector is equally con-
strained by an outdated legal and institutional governance
framework, with the limited evidence available suggesting
significant room for improvement in Lebanon’s equity
market – Lebanon’s stock market capitalization is
15 per cent of GDP – as well as regulatory capacity and
enforcement (Institute for International Finance, 2005).
RESEARCH METHODOLOGY
The research undertaken is interpretive in nature (Gephart,
2004), capitalizing on in-depth interviews with top manag-
ers of eight corporations operating in Lebanon to explore
their interpretations in relation to CG, CSR, and their per-
ceptions of the CG–CSR link. Interpretive research is quali-
tative, seeking to unearth collective frames of reference, or
construed realities that guide the attribution of meaning and
help account for how managers create, enact, or interpret the
reality they inhabit (Isabella, 1990). To gain a better under-
standing of CG/CSR interpretations, it was deemed useful
to seek viewpoints derived from managers involved in dif-
ferent types of organizations (e.g., Lebanese versus multina-
tional, and shareholder versus family ownership). This
diversified sample composition was deemed necessary to
capture and detect differences in perceptions, practices, and
interpretations between local managers and their interna-
tional counterparts, as well as institutions with potentially
differing CG and CSR dynamics. Our sample thus came to
comprise eight medium and large companies operating in
Lebanon, six of which are Lebanese owned, while two are
subsidiaries of multinational corporations (Table 3).
Initial website screening provided a preliminary idea of
the scope and sophistication of both CG and CSR in the
context of a sample of Lebanese and multinational firms. Ten
local firms and three subsidiaries of multinational corpora-
tions were subsequently contacted through phone and
invited to participate in the research, taking into consider-
ation both proximity and availability of personal contacts.
Upon securing preliminary approval from six local compa-
nies and two MNCs, a cover letter explaining the nature and
scope of the research, a copy of the interview guide, and an
appointment scheduled within two weeks to conduct the
Volume 16 Number 5 September 2008
450 CORPORATE GOVERNANCE

TABLE 3
List of Organizations Included in Study

Company name Line of business Geographic Geographic Number of Managers

origin reach employees interviewed

Standard Chartered Banking services Foreign International 5,000 • Head of Marketing

PLC and Corporate
Affairs
Aramex Express delivery, freight Foreign International 4,000 • Country Manager
forwarding, warehousing/
distribution services
Société Nationale Insurance, reinsurance/ Lebanese Regional 120 • Head of Corporate
d’Assurances financial products Communications
Lebanese Canadian Banking services Lebanese Local 540 • Senior Manager,
Bank SAL Human Resources
and Accounting
Albina SAL Wholesale of mechanical Lebanese Regional 75 • Owner and Chief
and electrical material for Executive Officer
the construction sector • Finance Manager
Medevco Wholesale and Lebanese Local 38 • Partner and CEO
distribution of public • VP of Sales and
works equipment Operations
Soliupak Manufacturer, Lebanese Local 50 • Deputy General
warehousing and Manager, Business
distribution of IV Development
solutions
Byblos Bank SAL Banking services Lebanese International 1,380 • Head of Corporate
Communications

interview was forwarded to managers. The interviews con-
sumed on average two hours, were conducted primarily in
English, tape-recorded, and subsequently transcribed and
compiled in the form of a case study addressing CG, CSR,
and their interfaces for each company. Each case study con-
sisted of 10–15 pages of script on average.
The research made use of semi-structured interviews
whereby an interview guide comprising three sections was
developed, based on the literature review presented in the
previous sections, addressing CG practices, CSR practices,
in addition to CG–CSR relationships (Table 4). To gain a
better understanding of managerial interpretations, it was
deemed useful to seek viewpoints derived from managers
involved in CG/CSR at different managerial levels. Accord-
ingly, managers occupying different positions in these firms
were contacted including those of CEOs, VPs, country man-
agers, deputy general managers, senior accounting manag-
ers, and heads of corporate communications; our meetings
hence solicited feedback from a total of 10 managers repre-
senting different hierarchical levels within their respective
organizations as illustrated in Table 3. All interviewees had
solid educational qualifications and international experience
although demographic data was collected in brief as manag-
ers spoke mostly in the capacity of representatives of their
respective organizations.
While the interview guide served the purpose of steering
discussions around common themes, the semi-structured
nature of interviews also left the interviewer to decide on the
sequence/wording of questions in the course of the inter-
view. Hence, the themes illustrated in Table 4 provided a
common stimulus around which interpretive comparisons
could be made, with the option available to explore in more
depth areas of significance to particular interviewees. While
some of the questions yielded factual information (e.g., own-
ership structure, composition of board of directors), others
allowed significant room for interpretation (e.g., motives for
good CG; principles motivating CSR). The last section of the
interview was devoted to a discussion of the different poten-
tial interrelationships between CG and CSR as per our three
models presented earlier, leaving questions there open-
ended to capture to the fullest managerial interpretations in
relation to CG–CSR interfaces.
Following the transcription of the interviews and the
compilation of case studies, a joint analytical effort involving
all three authors focused on detecting commonalities or pat-
terns of agreement/convergence in the statements provided
in relation to the basic dimensions outlined in Table 4; areas
of divergence were equally noted, debated, and high-
lighted. The analysis of the data collected in the last section
of the interview regarding conceptions of the link between

Volume 16 Number 5 September 2008 © 2008 The Authors

Journal compilation © 2008 Blackwell Publishing Ltd
CG AND CSR SYNERGIES AND INTERRELATIONSHIPS
TABLE 4
Topics Addressed in Interviews
I. Corporate governance (CG)
Ownership structure
Composition of board of directors
Board of director committees
Codes of conduct codes of governance
Executive compensation schemes
Required disclosure
Motives for good CG practice
II. Corporate social responsibility (CSR)
Conception of CSR
CSR activities
Formality of CSR program
CSR values
Principles motivating CSR
Anticipated benefits of CSR
Most important stakeholders
Measurement of CSR
III. Conception of CG/CSR relationship
CG pillar of CSR
CSR dimension of CG
CG–CSR part of continuum
CG and CSR followed a grounded theory approach as for-
mulated by Glaser and Strauss (1967), involving a compari-
son of the data with theory (presented in our models)
throughout the data collection/analysis process. Theory
helped direct attention to important dimensions while the
actual data collected helped shed light simultaneously on
the theory’s suitability in light of the data being collected
(Isabella, 1990). The result of this fluid movement between
theory and data is, according to Isabella (1990), very fruitful
in way of reconceptualization and accounting for all
nuances in the data. In this respect, points that participants
tended to repeat served to augment the evolving theory
(Isabella, 1990).
In the framework of the methodology outlined above, we
present our main findings in the following sections. The
findings are aggregated where feasible, with convergence
and divergence highlighted at every turn, while relevant
excerpts are also extracted verbatim to illustrate specific
points when discussing the main findings. The identities of
the managers are, however, concealed for confidentiality
and anonymity reasons. As illustrated below, the interviews
provided interesting and fruitful insights regarding CG,
CSR, and CG–CSR relationships and interfaces, based on
managerial conceptions and practical interpretations.
RESEARCH FINDINGS
Assessment of CG Practices
We obtained interesting feedback about current CG prac-
tices, generally indicating awareness of and engagement
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
451
with CG issues and what they entail. All interviewees dis-
cussed various aspects of CG that are commonly integrated
in the practice of their respective firms, with the most fre-
quently discussed aspects revolving around compliance,
transparency, and disclosure. While firms in our sample
exhibited different ownership structures involving large,
small, and institutional shareholders as well as family-
owned structures (please see Table 5), they mostly had
independent directors (five out of eight), and board of
directors committees (four out of eight). In half the cases,
the chairman of the board of directors also acted as the
CEO (four out of eight). The majority of firms had formu-
lated a remuneration policy for board members and key
executives, highlighting the link between remuneration
and performance (six out of eight). The majority of the
firms had codes of conduct in place (seven out of eight),
and all stressed on the importance of required disclosure
and the regular review of internal controls (eight out of
eight).
The reported strength in current CG practices revolved
around the strategic guidance exercised by boards, and
their regular oversight of internal control mechanisms. All
managers mentioned the regular use of audit committees
to oversee the company’s disclosure practices. There was a
mention in two cases (local firms) of boards taking on day-
to-day operational responsibilities rather than focusing on
long-term strategic issues. Three managers described their
company boards as either passive “rubber stamps” or as
active participants in furthering the interests of only con-
trolling shareholders. Several managers also mentioned in
confidence problems arising from concentrated ownership,
weak shareholder protection, insufficient disclosure, or a
combination of these factors. All the interviewees generally
shared the view that the emphasis in their CG practice
is on ensuring compliance with laws and regulations,
establishing codes of conduct, and the oversight of inter-
nal control systems for financial reporting. Generally,
the control facet of GG was certainly more emphasized
in the discussions held than the strategic leadership
component.
Comparing the CG practices of foreign companies to
those of their local counterparts, we noticed that the two
subsidiaries of international firms in our sample separated
between the position of CEO and chairmanship of the
board, which was not the case for most of their local coun-
terparts. We also noted more transparency on their part
regarding the process of staffing boards and the configura-
tion of remuneration for board members and key execu-
tives. The declared motives for the adoption of sound CG
practices revolved around consistency with mother firm
practice and compliance with international standards. Local
companies claimed, on the other hand, that a major incen-
tive for them to adopt sound CG norms and principles
stemmed from the requirements of international certifica-
tion (e.g., ISO), and also to keep up with the requirements
of global competitiveness (e.g., Basel II requirements).
Several of the local companies, however, admitted out-
standing problems in way of CG implementation, stemming
from macroeconomic instability and the very limited vigi-
lance and capacity of the regulatory and judicial systems in
the country.
Volume 16 Number 5 September 2008
452 CORPORATE GOVERNANCE

Assessment of CSR Practices

shareholders

consistency
International
Chartered

standards;
Institutional
Standard
We also obtained interesting feedback regarding the current
CSR practices of our sampled firms. All the managers inter-
Foreign companies

Yes
Yes

Yes
Yes
Yes
Yes
No
viewed adhered to a voluntary action or philanthropic type
conception of CSR (Table 6). When asked about the type of

self-improvement
Small shareholders CSR performed, all managers consistently referred to phil-
anthropic activities and programs revolving mainly around
Aramex

philanthropic donations and ranging from the sponsoring of

International
standards;
scholarships and events to donations/programs involving
the orphans or handicapped, to volunteering and promoting
good working conditions. The majority of local companies
Yes
Yes

Yes
Yes
Yes
Yes
No

(five out of six) had no formal CSR program in place and no

specific CSR values, with their philanthropic CSR activity

certification
Soliupak

rooted in most cases in principles of legitimacy and gener-

alized community commitments.
Partners

ISO
When asked about the principles motivating CSR behavior,
Yes
Yes
Yes
No
No

No
An Overview of Reported Corporate Governance (CG) Practices

most managers mentioned the principle of legitimacy and the

–

principle of managerial discretion. As noted by several of the

specific
Medevco

managers interviewed, legitimacy is generally conceived as a

Partners

None in

license for continued operation and appreciation by society,

Yes
Yes
Yes
No
No

despite the conspicuous absence of specific institutionalized

–

expectations. Hence, as illustrated in Table 6, all the managers

Large shareholders

interviewed – with no exception – mentioned the importance

Byblos Bank

requirements

of maintaining legitimacy and credibility in a shared envi-

ronment, and providing their share of reciprocal benefits and
investments. Four managers also mentioned the principle
Basel II

of managerial discretion in the sense that their firm’s CSR

Yes

Yes
Yes

Yes
Yes
Yes
Yes

orientation has been molded by the philanthropic values

Lebanese companies
TABLE 5

and enlightened entrepreneurship exercised by founders,

self-improvement
Large shareholders

owners, or top managers of the enterprise.

Société Nationale
d’Assurances

In relation to the distinction between internal and external

Follow trends;

CSR, the external dimension of CSR was clearly emphasized

by all the managers interviewed, with all the managers
referring to customers as the most important external
stakeholder, followed by the community stakeholder. This
Yes

Yes

Yes
Yes
Yes
Yes
No

reflects an overall instrumental approach to CSR, which is

Canadian Bank

nuanced by normative flavors vis-à-vis the community

certification
Shareholders
Lebanese

stakeholder. The internal dimension of CSR and relevant

issues there pertaining to health, safety, training, and
working conditions were in turn mentioned by four of the
ISO
Yes

Yes
Yes

Yes
Yes
Yes
Yes

managers interviewed (two local firms and two interna-

tional), and employees were classified as the second most
Private family-owned

important stakeholder in the majority of cases (six out of

ISO, International Organization for Standardization.

eight). Generally, stakeholders seem to be considered im-

portant when they represent rational or economic motives
Albina

certification

for the firm.

The instrumental approach to CSR is further illustrated
through the reflections obtained on the anticipated benefits
ISO
Yes

Yes

Yes
Yes
No
No
No

of CSR, with the managers of local firms focusing primarily

on issues relating to differentiation, enhanced reputation,
Chairman of board of directors

Senior management pay tied to

Board of directors committees

legitimacy, and recognition in the community. Interestingly,

Motives for good CG practice
Review of internal controls

the managers of international firms accorded equal attention

to the potential internal benefits of CSR involvement as
Independent directors
Ownership structure

reflected in increased employee satisfaction and enhanced

Required disclosure

innovation. A sense of enlightened self-interest was detected

Code of conduct

performance

among the majority of the managers in the sense that they

also CEO

appreciated the short-term and long-term benefits of CSR,

Indicators

particularly in terms of increasing the credibility and trust-

worthiness of the firm in the eyes of internal and external
stakeholders.

Volume 16 Number 5 September 2008 © 2008 The Authors

Journal compilation © 2008 Blackwell Publishing Ltd
© 2008 The Authors
TABLE 6
An Overview of Reported Corporate Social Responsibility (CSR) Practices

Indicators Lebanese companies Foreign companies

Albina Lebanese Société Nationale Byblos Bank Medevco Soliupak Aramex Standard

Journal compilation © 2008 Blackwell Publishing Ltd

Canadian Bank d’Assurances Chartered

Nature of CSR Altruistic Altruistic Altruistic Altruistic Altruistic Altruistic Altruistic Altruistic
CSR activities Donations Donations Donations Donations Donations None on a Donations Donations
sponsorships sponsorships sponsorships safe sponsorships sponsorships corporate level sponsorships sponsorships
awareness volunteerism and challenging partnerships with (but active on a volunteerism volunteerism
campaigns good work workplace NGOs employing personal level) fulfilling fulfilling
conditions conditions locals workplace workplace
CG AND CSR SYNERGIES AND INTERRELATIONSHIPS

employing locals employing locals

Formal CSR No No Yes No No No Yes Yes
program
CSR values Environmental Staff well being Commitment to Community None None Community Courage to
protection community well-being and staff intervene in
well-being community
Principles Legitimacy Legitimacy Legitimacy; Legitimacy; Legitimacy; None; CSR Legitimacy; Legitimacy
motivating CSR managerial managerial managerial viewed as pure managerial
discretion discretion discretion PR discretion
Anticipated Good relations Differentiation Motivated Differentiation; Respect and No benefits Satisfied Employee
benefits of CSR with affiliates from competition workers; status; credibility employees; satisfaction;
activity and suppliers reputation recognition reduced turnover innovation
benefits

Volume 16
Most important Customers Customers Customers Customers Customers Customers Customers Customers
stakeholders employees employees employees employees employees employees
suppliers community community community community community
shareholders owners shareholders
Measurement of No No No No No No No No

Number 5
CSR

NGO, nongovernmental organization; PR, public relations.

453

September 2008
454 CORPORATE GOVERNANCE

TABLE 7
An Assessment of the CG–CSR Link

Indicators Lebanese companies Foreign companies

Albina Lebanese Société Byblos Medevco Soliupak Aramex Standard

Canadian Nationale Bank Chartered
Bank d’Assurances

CG pillar of CSR Yes Yes – – Yes Yes Yes –

CSR as a dimension of CG – – – Yes – – – –
CG–CSR continuum – – Yes – – – – Yes
Model embraced 1 1 3 2 1 1 1 3

CG, corporate governance; CSR, corporate social responsibility.

None of the companies interviewed measure systemati-
cally the social impacts of their CSR interventions, and the
findings suggest that corporate social reporting has not
picked up momentum in the Lebanese context. The compa-
nies interviewed indeed seem to be according no attention to
social assessment devices, such as social indicators or the
social balance sheet. Despite this trend, and the possibility
of a spontaneous social desirability bias in the context of
CSR research, the managers provided valid and concrete
examples of CSR initiatives, as in charity donations and/or
specific donations to the Lebanese Red Cross, sponsorships
and educational scholarships, environmentally friendly
technology, and partnerships with NGOs in pursuit of social
goals. These were invariably fleshed out with reference to
concrete investments and examples.
In way of comparing the conceptions and practices of
Lebanese and foreign companies, only one local Lebanese
company has a formal CSR program, whereas the CSR pro-
grams of the two multinational firms seem to have been
institutionalized. Most local companies seem to have also
made only modest progress in way of formalizing their CSR
values or integrating CSR into daily operations and decision-
making processes. While the subsidiaries of multinational
corporations also have maintained an altruistic approach to
CSR and had vaguely formulated values, they have made
significant strides in way of setting specific budgets and
themes for their local CSR programs. They are thus more
sophisticated in their approach and more at ease in commu-
nicating their CSR strategies and programs.
Assessment of the CG–CSR Link
We obtained in turn varied reflections on the nature of the
CG–CSR relationship from managers, based on their actual
practice and interpretation, which are illustrated in Table 7.
Five of the respondents share the view that a company
cannot have a genuine CSR orientation, if it does not have a
solid CG pillar in place. It is essential, according to these
interviewees, to lay the necessary infrastructure in way of
strategic leadership and good control systems, in order for
the firm to benefit its owners and internal/external stake-
holders. These views lend support to the Hancock (2005)
postulation (model # 1). Two of the respondents argued that
CG and CSR are two facets (internal and external) of com-
mitment to sound business conduct and that they should be
integrated into the same spectrum or continuum of corpo-
rate disclosure. The argument advanced by these managers
is that CG and CSR are indeed complementary and mutually
reinforcing in the sense that an effective CG structure pro-
tects shareholders from unlawful action while an effective
CSR program prevents various actions which may be legal
but inappropriate in relation to their impact or implications
for specific constituencies/stakeholders. Hence, we could
detect some support for the Bhimani and Soonawalla’s
(2005) model examined earlier (model # 3). Only one of the
local managers/respondents interviewed considered CSR as
a dimension or attribute of CG as per model 2. According to
this view, good CG also entails ensuring that companies are
run in a socially responsible way. In a way, this is a more
sophisticated conception of CG that considers CSR as an
integrated mandatory aspect or dimension of good gover-
nance. Based on our excursion in this paper, and accumu-
lated reporting evidence, it is clear that most firms still
conceive of CSR as optional and discretionary rather than as
an integrated/mandatory attribute of CG. We have thus
encountered limited support for this conception in our
sample, and we expect this to be more widely shared.
DISCUSSION OF FINDINGS AND
THEORETICAL PROPOSITIONS
The findings are discussed critically in this section in way of
fleshing further relevant insights and identifying concrete
theoretical implications. In relation to CG, the interviews
conducted and managerial interpretations clearly suggest
the prevalence of mainstream CG in the Lebanese context,
dominated by the traditional neoclassical view, coupled
with an emphasis on the control and compliance aspects of
CG. Our findings suggest that the pressures for convergence
are salient, and particularly felt by the large multinational
firms. As articulated by one of the managers “we are con-
tinuously adapting our CG practices in line with the domi-
nant international model given the integration of financial

Volume 16 Number 5 September 2008 © 2008 The Authors

Journal compilation © 2008 Blackwell Publishing Ltd
CG AND CSR SYNERGIES AND INTERRELATIONSHIPS
markets and pressures from our international institutional
investors.” Awareness of international codes of good gover-
nance was, however, counterbalanced and nuanced by an
appreciation among the majority of managers interviewed
(particularly local ones) that CG needs to be considered in
context, and that CG practices are invariably influenced and
molded by national institutional environments, and cultural,
economic, and sociopolitical constellations. “CG practices
need to take account of differences in culture, political tra-
dition, financing options, corporate ownership patterns and
legal and regulatory environments” as noted by one of the
local managers. Divergence from best practice was invari-
ably interpreted and justified in this context, as in the failure
to pursue a dual strategic leadership pattern in some cases,
or problems arising from concentrated ownership, weak
shareholder protection, or insufficient disclosure. Various
managers also noted constraints stemming from macroeco-
nomic instability and the very limited vigilance and capacity
of the regulatory and judicial systems in the country.
According to one of the managers, “while it is difficult to
undermine the benefits of integrating best CG practices,
there are many hurdles, stemming from existing rules and
regulations that are neither exhaustive nor properly
enforced, regulatory bodies that are incapable of inspecting
complaints and violations, and a largely incompetent judi-
cial system.” Our findings thus highlight the salience of the
sociopolitical view of CG as suggested by prior research
(Aguilera and Jackson, 2003; Gordon and Roe, 2004:
Aguilera et al., 2006; Zattoni and Cuomo, 2008), translating
into our first theoretical proposition:
Proposition 1: Despite convergence pressures arising from
globalization, local socio-politico-institutional environments
significantly affect CG practices in developing countries.
In relation to CSR, our findings suggest the prevalence of
a philanthropic conception of CSR among the managers
interviewed. This orientation is mostly rooted in religious
principles in the Lebanese context as noted in previous
studies (Jamali, Zanhour and Keshishian, 2008), although
this connection was difficult to establish in this research
given that it was not explored in depth. An instrumental
CSR orientation was detected among the majority of the
managers interviewed, translating into an enlightened self-
interest and concern with long-term value maximization
(Jensen, 2002), and an interim focus on traditional stakehold-
ers, including customers, employees, and shareholders. As
noted by one of the local managers, “our objective is to
attend to the needs of our customers and employees, which
in the long run implies greater value creation for our owners
and shareholders.” Some local managers explicitly admitted
their concern with the anticipated benefits of CSR, particu-
larly with the strong corporate branding and enhanced
public image that are by-products of CSR adoption, while
others echoed a more sophisticated stakeholder orientation,
nuanced by normative flavors particularly in relation to the
community stakeholder. As expressed by one of the manag-
ers, “we seek to nurture a wide spectrum of trust based
stakeholder relationships, which can serve as a source of
opportunity and competitive advantage.” Another manager
expressed the view that “we realize that we operate within a
bounded space and that giving back to the community is
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
455
paramount.” The natural environment was conversely
accorded the least attention among managers in our sample,
suggesting in turn that ecological sustainability does not
constitute an integral part of managerial interpretations of
CSR and that triple bottom line integration remains a distant
aspiration. Various managers noted in this respect limited
institutional pressures for CSR in their local context, particu-
larly in relation to the environmental dimension and
expressed a desire for more active involvement on the part
of governments and NGOs. These findings combine to
explain the limited sophistication of CSR conception among
local managers, the continued prevalence of philanthropic
CSR, and a gap between CSR rhetoric and reality in devel-
oping countries as suggested by previous research (Jamali
and Mirshak, 2007; Jamali, 2008), leading to our second
proposition:
Proposition 2: Limited institutional pressures for homogeniza-
tion in CSR translate into philanthropic and instrumental CSR
orientations in developing countries.
We turn here to analyze the third and most important
component of this research relating to CG–CSR links and
interfaces. Our findings reveal a predominant interpretation
of CG as a pillar of CSR among managers (consistent with
model #1), suggesting conceptions of CSR as necessarily
anchored in a strong CG foundation. In the words of one
manager, “a company can not apply a stand alone CSR
program, if it does not first instill a credible robust, trust
engendering, accountability setting, rights protecting CG
framework.” Several managers aptly communicated in this
respect that the nature of a firm’s CG invariably persuades
managers and executives to emphasize particular goals and
objectives in relation to CSR and that company boards are
accordingly key participants in ensuring companies do
promote and meet CSR standards. Consistent with the views
of Elkington (2006), CSR is thus conceived by the majority of
the managers interviewed as a board responsibility, or, as
aptly suggested by one manager, as “the outward expression
of a Board’s CG policies.” One manager summed it up nicely
in these words “the external CSR pulse is invariably framed
in the context of sound and effective CG policies.” That CSR
needs to be anchored in a strong CG pillar and polices and
needs to be increasingly considered as part of the responsi-
bility of company boards has also received support in prior
research (e.g., Mahoney and Thorne, 2005; Mackenzie, 2007;
Parsa, Kouhy and Tzovas, 2007). This leads to our third
theoretical proposition:
Proposition 3: Good CG is increasingly considered in develop-
ing country contexts as a necessary foundational pillar for a
genuine and sustainable CSR orientation.
Our findings finally suggest some interpretations among
the managers interviewed of CG and CSR as complementary
and coexisting components of the same accountability con-
tinuum. The difference between the two ends of the con-
tinuum as expressed by one of the managers is that “with
CG, we are practically applying the letter of the law, whereas
CSR represents the spirit of the law.” In other words, while
CG standards and conformance may be required to ensure
protection from abuses, this cannot replace a general sense
of responsibility in business that goes beyond the letter
Volume 16 Number 5 September 2008
456
FIGURE 4
CG and CSR Interfaces
Performance
Driven
(Voluntary)
Corporate Social Responsibility
Progressive
HRM Leadership
Corporate Governance
Conformance
Driver
(Compliance)
of the law as illustrated in voluntary social performance.
The same analogy was echoed by another manager who
expressed that “CG is the way you run your business, while
CSR effectively represents its conscience.” The same
manager expressed that “CSR is a self-regulating form of
governance, it is not legally binding, but morally guiding.”
Two managers observed increasing concern with the right
end of the continuum, going beyond legal conformance to
tackle initiatives consistent with voluntary corporate social
performance. As summarized by one manager, “while the
role of CG in establishing accounting standards and a frame-
work of accountability can not be discounted, we are
increasingly trying to adopt commitments to wider forms of
social and environmental engagement and reporting, as
reflected in corporate performance on the right end of the
continuum.” These observations combine to suggest that
firms are increasingly expected to address CG and CSR
issues hand in hand, and to move beyond conformance or
compliance to voluntary performance, which is also sup-
ported by previous research (e.g., Marsiglia and Falautano,
2005; Clarke, 2007), leading to our fourth proposition:
Proposition 4: The ascendancy and taken-for-grantedness of
good CG in developing economies is increasingly comple-
mented by due regard and consideration for voluntary corpo-
rate social performance.
Based on the research presented in this paper, and on the
insights derived through the empirical component and dis-
cussions with managers, we propose a model that summa-
rizes the main interfaces of CG and CSR (Figure 4). Our
model reconciles the main contributions of the three models
presented earlier. The model illustrates our starting assump-
tion in this paper that CG and CSR are two sides of the same
coin (as per Bhimani and Soonawalla, 2005). Second, it posits
CG as a necessary foundational pillar or building block for
CSR as per Hancock (2005). Third, it illustrates the cross-
connects between CG and CSR revolving around strategic
leadership and stewardship as implied in Ho’s (2005) pos-
tulation (reiterating in this respect the point that CSR is
equally the responsibility of corporate boards) while also
capturing the overlap between CG and the internal dimen-
sion of CSR revolving primarily around progressive human
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CORPORATE GOVERNANCE
External
Firm
Environment
Strategic Board
Stewardship
Internal
Firm
Environment
resource management (as in Table 2). Finally, our model sug-
gests that while CG is increasingly conformance or compli-
ance driven, CSR falls on the other hand in the realm
of voluntary social performance as per Bhimani and
Soonawalla (2005).
Reflecting further on the wider implications of this
research, our findings posit some challenges to agency
theory, suggesting increasing convergence between the
views of both principals and agents regarding a widened
stakeholder approach, reconciling basic principles of CG
and CSR. This can be safely drawn from the interviews we
conducted generally, but two of the interviews specifically
involved both shareholders and managers, who seemed in
agreement regarding a systematic and balanced attention to
all stakeholders in the context of a sound CG framework and
a wider CSR orientation. Thus, the tension between fiduciary
responsibility and the responsibility to a wider spectrum of
stakeholders or what is referred to as the stakeholder
paradox (Freeman, 1984) is not as salient as often assumed.
Stakeholder theory seems to provide the flexibility for
coping with the demands of a broadened CG/CSR agenda,
even at the expense of increasing agency costs as per Jensen
(2002).
Our findings lend support to institutional theory, suggest-
ing that convergence in the context of both CG and CSR is
often undermined by local socio-politico-economic con-
straints in developing countries. Despite familiarity with
international CG and CSR codes and principles, the majority
of managers reported serious hurdles in way of best practice
implementation stemming from both internal and external
environments. This translated into an accentuated emphasis
on internal CG mechanisms to offset perceived weaknesses
in legal and judicial structures, but challenges were reported
in the internal domain as well, suggesting that global con-
vergence toward a single Anglo-American model of gover-
nance is more protracted and complicated than often
assumed (e.g., Hansmann and Kraakman, 2001). These find-
ings are consistent with what is reported by Khanna, Kogan
and Palepu (2002) of no evidence of convergence in CG
practice with the advent of globalization, aside from the
adoption of general CG recommendations, which are, in
turn, not widely implemented.
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
CG AND CSR SYNERGIES AND INTERRELATIONSHIPS
Our findings finally suggest significant linkages between
the two ascending fields of CG and CSR. Both disciplines
have attracted increasing attention in the context of global-
ization and escalating demands for greater accountability
by companies. This research has made it clear that those
two disciplines share more in common than previously
assumed and that these interfaces are also increasingly
appreciated by managers in the context of their actual prac-
tice and interpretation. Appreciation for those synergies
and interdependencies has certainly been detected in this
study and is deserving of further scrutiny and consider-
ation in other contexts. While CG was generally conceived
as establishing a basic framework of stewardship and trust-
eeship, CSR was conceived as the outward expression or
manifestation of internal CG policies and principles.
CONCLUDING REMARKS
In researching the nature of the CG–CSR relationship, this
paper has surveyed the literature and explored the percep-
tions and interpretations of CG and CSR in Lebanon. The first
conclusion that can be safely drawn is that CG and CSR
should not be considered and sustained independently. Irre-
spective of the type of relationship that exists between CG
and CSR, a company without an efficient long-term view of
leadership, effective internal control mechanisms, and a
strong sense of responsibility vis-à-vis internal stakeholders
cannot possibly pursue genuine CSR. CSR interventions risk
being taken for public relations attempts particularly when
the CSR orientation is not rooted in the context of a solid
internal CG foundation. Conversely, CG is not entirely effec-
tive without a sustainable CSR drive because a company has
to respond to the needs of its various stakeholders in order to
be profitable and create value for its shareholders/owners.
These observations suggest in turn that the link between CG
and CSR is unequivocally a salient two-way relationship.
Our interpretive research in the Lebanese context sug-
gests that most respondents appreciate the increasing con-
vergence between CG and CSR, with the view that the
more robust the CG framework in place, the more likely
the evolution toward a sustainable CSR drive. In this
respect, our findings support the insights of Elkington
(2006) that the CSR agenda is progressively an extension of
the CG agenda and is the responsibility of corporate
boards. As noted in this paper, the nature of a firm’s CG
sets the overall tone for the organization, and can be used
to entice executives to pursue specific goals and objectives
in the CSR domain. In light of this empirical investigation,
we have put forth a number of theoretical propositions that
can serve to guide further research on the topic, suggesting
importantly that CG is a necessary pillar for a genuine and
sustainable CSR orientation and that the ascendancy and
taken-for-grantedness of CG is increasingly complemented
in developing countries by due regard for voluntary CSR
performance.
Reflecting further on the theoretical and practical impli-
cations of this study, our findings challenge the usefulness of
agency theory as the dominant paradigm in CG research in
favor of stakeholder theory. The managers interviewed
seemed less concerned about the importance of CG mecha-
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing Ltd
457
nisms in reducing agency costs, than they were about creat-
ing stakeholder value in the wider sense. Stakeholder theory
indeed seems to be a promising theoretical lens for future
research relating to CG–CSR interfaces. Moreover, the find-
ings suggest that institutional theory could provide fruitful
insights when exploring patterns of global convergence in
CG and CSR research. Our findings indeed support the path
dependence hypothesis in the context of CG and CSR,
suggesting that national history trajectories and specific
institutional constellations stand as potential barriers to
convergence in the CG and CSR domains.
Further research can seek to shed light on the diffusion of
CG and CSR, particularly in developing countries, and the
multifaceted nature of CG and CSR and their complex inter-
faces. There is room in this respect for research on the inter-
play of internal and external CG mechanisms in specific
institutional contexts and how these reflect in turn and mold
peculiar CSR orientations. There is also room for research on
the largely voluntary accountability paradigm advocated in
the context of CSR, and how this agenda can be reconciled
with agency theory. Of particular interest is the trend to
articulate international standards and obligations in the CSR
domain and how these potentially cross-connect with inter-
national CG codes and principles.
While this paper has provided fruitful initial insights into
CG–CSR interfaces from a developing country perspective,
the research, admittedly, has a number of limitations. The
findings stem from a single-country investigation. This,
combined with the small sample size (eight companies),
may imply that the results cannot be readily generalized,
although they are likely to have wider relevance and appli-
cability, particularly in developing countries. The evidence
gathered is also based on self-reporting, given the qualita-
tive interpretive approach adopted, hence raising the possi-
bility of a potential social desirability response bias. Social
desirability response bias has indeed been noted to be par-
ticularly salient in the context of developing and collectivist
economies (Bernardi, 2006).
Notwithstanding these limitations, we believe this study
makes important contributions and constitutes a significant
advancement in CG–CSR research. The study indeed has
explored relatively new ground by investigating CG and
CSR conceptions and applications in developing countries
as well as interpretations of CG–CSR interfaces, suggesting
that both CG and CSR need to be considered as complemen-
tary pillars for sustainable business growth in a globalizing
environment. Our research, moreover, challenges the hege-
mony of agency theory as the dominant paradigm in CG and
CSR research, highlighting in turn the usefulness of alterna-
tive stakeholder and institutional theoretical lens in account-
ing for a complex blend of normative and instrumental
motivations and orientations in developing country con-
texts. These initial trends can hopefully be further explored
and validated through future research on the topic.
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Dr. Dima Jamali is a Senior Lecturer in the School of Man-
agement, University of Southampton and is an Associate
Professor in the School of Business, American University of
Beirut. She holds a PhD in Social Policy and Administration
from the University of Kent at Canterbury, UK. Her research
interests encompass corporate social responsibility as well
as gender and careers. She worked as an expert consultant
on projects funded by the World Bank, the US Agency for
International Development, NGOs, and other regional and
local public and private firms. She is the author of numerous
papers in international peer-reviewed journals, including
Corporate Governance: An International Review, Journal of Busi-
ness Ethics, Business Process Management Journal, and Women
in Management Review.
Dr. Assem Safieddine is an Associate Professor and Chair-
person of the Finance, Accounting and Managerial
Economics Track, Director of the Corporate Governance
Program at American University of Beirut, and a board
member of the Dubai Ethics Resource Center. He is the
founding president of the Lebanese Chartered Financial
Analyst Society, regional director of the Global Association
of Risk Professionals, and president of the Lebanese Risk
Management Society. Dr. Safieddine holds a PhD in
Finance from Boston College. His research has been pub-
lished in leading finance journals like the Journal of Finance,
Journal of Financial Economics, and the Journal of Financial
and Quantitative Analysis, and his work has been profiled in
the Business Week, Harvard Business Review, CFA Digest,
and the National Bureau of Economic Research along with
others.
Myriam Rabbath is a recent graduate of the MBA program
at the American University of Beirut. She holds an MBA in
Finance from the American University of Beirut (Lebanon),
and a BA in Business Administration from Haigazian Uni-
versity (Lebanon). Currently, she is working as an analyst in
the Organization, Strategy and Planning Department in one
of the top five leading banks in Lebanon.
Volume 16 Number 5 September 2008